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Thursday, January 19, 2006

Ind. Law - Small wineries in Illinois buffeted by the alcohol-distribution lobby; What is happening in Indiana?

"Small wineries in Illinois buffeted by the alcohol-distribution lobby; What is happening in Indiana?" was the headline to this ILB entry from Jan. 11th.

Today the answer to the question seems to be: The same thing is happening in Indiana. Here are two stories.

The first is from the column, Uncorked, by Dan and Krista Stockman, that appears in the Fort Wayne Journal Gazette. Here are a few quotes from last weekend's lengthy column:

You might think proposed legislation that clearly spells out how Indiana’s wineries can legally ship their products to Indiana consumers has a good chance at being approved and signed into law.

After all, it makes perfect sense: It supports small businesses, family businesses and farming, helps the state’s newest darling – agri-tourism – and is good for consumers.

But we can think of at least 181,000 reasons why it might have the same chance as the “Sideways” character Miles ordering a Merlot with his dinner.

According to the reports filed with the state by the Wine & Spirits Wholesalers of Indiana Political Action Committee, from 2000 through 2004 the lobbying group gave $181,043.21 to Indiana politicians and candidates. Large and small, prominent and obscure, Republican and Democrat, the wholesalers who have been fighting direct-shipping have spread around an average of $36,000 a year.

Now, we’re not suggesting that the wholesalers have purchased the legislature for a mere $36,000 a year. Heck, even Illinois politicians – whom we dealt with for years and know many deserve the reputation they’ve gained – aren’t that cheap. But the wholesalers do spread the wealth – and in politics, that means access. * * *

Will it be enough to get them to vote in favor of a closed system that replaces a free market with a state-enforced monopoly? Will it be enough to have them turn their backs on small family businesses and farmers? Or consumers who just want to order a bottle of southern Indiana wine they can’t get in Fort Wayne?

We’re certain that if they do vote against shipping, it will be because they really believe it would be bad for the state. But that kind of money being thrown around has to make you nervous.

There is hope, but it comes with some scares. Consider the case in Michigan, where the state, just like Indiana did, immediately clamped down on direct shipping after the U.S. Supreme Court said in-state and out-of-state wineries have to be treated the same.

Both states tried to even the playing field by barring in-state shipping, thus closing the door to shipping from out-of-state.

In Michigan, a bill appeared in the Legislature that would have barred Michigan wineries from even selling wine in their own tasting room. Despite statewide outcry, the bill advanced unchecked for weeks. We’re sure it had nothing to do with the findings of the Detroit Free Press, which showed the Michigan wholesalers had made $238,000 in donations to Michigan lawmakers and let them use their party room to raise another $440,000. The trips to the Bahamas and Grand Cayman Island also had nothing to do with their voting for a bill their citizens hated, we’re sure.

Finally, however, common sense prevailed, and a bill that allows direct shipping cleared the Michigan Legislature and was signed into law.

But what will happen in Indiana? * * *

[I]f common sense can prevail in Michigan, it certainly can prevail here.

Gov. Mitch Daniels told Uncorked recently that he’s leaning in favor of shipping, saying the recent temporary injunction allowing in-state shipping until March 1 appears to be an interim solution “and seems to be a good thing.”

“I do want to see these small businesses protected,” Daniels said. “I’m hopeful we can get a permanent solution that allows them not to just maintain their business, but increase it.”

Increasing the business opportunities available to winemakers is exactly the goal of legislation introduced in the House by Reps. Eric Koch, R-Bedford, and Peggy Welch, D-Bloomington, and in the Senate by Sen. Brent Steel, R-Bedford.
Not only would the legislation allow shipping – by both in- and out-of-state wineries – it would expand when and where wineries can sell their wines. * * *

[I]t would limit the amount of wine a winery could ship to an individual to 24 cases or 9 liters a year. That’s certainly a legitimate restriction. We can’t imagine most people needing even 24 cases in a year, but there may be some who buy wine as gifts for a lot of people, employees, for example, that would need a lot of wine from one winery. And if 24 cases from one winery aren’t enough, they’ll just have to buy from two or three wineries.

To be able to ship wine, a winery would have to pay a $100 registration fee, collect sales and excise taxes from Indiana buyers and ship the wine in a clearly-marked package requiring a signature. None of these restrictions seem unreasonable.

So if this sounds good to you, ask your local representatives to support the legislation. The more they hear from you, the more they’ll understand what their constituents want – that’s very important to elected officials. Remember, if lawmakers don’t hear your voice, the only voice they’ll hear is that of the wholesalers.

Today columnist Mike Leonard of the Bloomington Herald-Times reports:
Monday morning, in the kind of move that makes many people revile the political system, legislators in the pocket of the wholesalers stripped the language out of bills favorable to wine consumers and wineries (co-written by state Rep. Eric Koch, R-Bedford and Rep. Peggy Welch, D-Bloomington) and inserted essentially new bills that could have been written by the wholesalers themselves.

It was a classic, strip-and-replace move at the last minute, clearly aimed at flying under the radar so that wineries and consumer groups would not have time to mobilize against the legislation.

"What they're proposing is an unworkable system, basically, a barrier to free trade," Indianapolis attorney Robert Epstein said Monday afternoon as he pored over amendments offered to a subcommittee one day before an expected vote by the House Committee on Public Policy and Veterans Affairs.

At first blush, the most onerous aspect of the proposed legislation seems to be the requirement that any consumer who wants to order wine not available at a local, commercial retailer to set up a one-time personal distribution system. The consumer would have to find a wholesaler willing to obtain the wine from the producer and then a retailer willing to take shipment from the wholesaler. Everyone involved would add monetary fees for their time and trouble.

The legislation proposed also sets up a "direct wine seller's permit" at a cost of $500 to further discourage the sale of wine not already in the wholesaler-retailer pipeline.

And if that's not enough, there is a provision that wine not available for sale in retail stores can be shipped only after a "face-to-face transaction on the farm winery premises."

Could they think of any more ways to crush wine shipping and cripple the 32 Indiana farm wineries? Some winery advocates say that half of Indiana's wineries could close under such legislation.

More from the column:
Some background information is required here. For three decades, Indiana wineries such as Oliver Winery and Butler Winery in Bloomington have been shipping wine, in-state, to visitors to their winery stores. Primarily, it's a convenience for consumers who visit a winery and don't want to haul a case of wine around in their trunk as they wander Indiana.

Hoosier wineries voluntarily declined to ship out-of-state at the advice of what is now called the Indiana Alcohol and Tobacco Commission. And most out-of-state wineries declined to ship to Indiana because of warnings from the state that shipments would constitute a felony offense.

Last summer, however, a push from wine consumers and wineries across the country caused the U.S. Supreme Court to hear a Michigan case that argued that allowing in-state shipping, but denying shipping from out-of-state, violated the commerce clause of the U.S. Constitution.

At first, wine lovers rejoiced. But instead of relenting, Indiana, and several other states, fell back on a completely disingenuous rationale that in-state shipping had always been illegal. Even though the state's own Web site said tourists could visit an Indiana winery, buy wine, and have it shipped to their homes.

This set up the battle being fought across the nation - to allow all shipping or to ban all shipping. In Indiana and most jurisdictions, the wholesalers have the money to spend on lobbyists and contribute to legislators, and the wineries and consumers have no voice at all.

Oddly, there do not appear to be any Indiana news stories on the wine shipping bills; the only coverage I've been able to locate are these two ably-written columns.

The bills are SB 110 and HB 1036.

Posted by Marcia Oddi on January 19, 2006 02:20 PM
Posted to Indiana Government | Indiana Law